BT INVEST

A Personal Finance and Investment Arm of The Business Times
MARKET TODAY:

Archive

Revival of the Singapore Oil & Gas Industry

FTSE ST Oil & Gas

Since hitting a high of 774.6 in September 2012, the FTSE ST Oil & Gas Index has been undergoing a multi-month consolidation phase. Interestingly, there are a couple of positive elements to suggest that a bullish breakout is possible from this long-term “range-bound” configuration.  

Firstly, prior to the start of this consolidation, a clear set of five waves upside movement (impulsive) can be seen from the 463.60 low of Oct 2011. Therefore based on Elliot wave principle, another set of impulsive waves should occur to form a new high above the Sep 2012 swing high of 774.68 after this current consolidation ends. Secondly, price action from the “range-bound” consolidation has formed an “Ascending Triangle” chart pattern. This type of chart pattern is typically a bullish continuation formation where the future price action should follow the direction its prior upside movement after the breakout of the “Ascending Triangle”.
 Thirdly, the Stochastic oscillator has flashed a bullish crossover signal and just exited from its oversold region which suggest a built-up in upside momentum.

Lastly, the fortune of the Oil & Gas industry has a direct correlation with the price of oil. Higher oil prices tend to be positive for the industry. From the weekly continuous chart of the Light Crude Oil futures contract, we can see that it has been trading in a similar consolidation phrase since hitting its peak of 114.80 on May 2011. Chart pattern wise, it is called a “Symmetrical Triangle”. The most important element to note is the rising trendline support of the “Symmetrical Triangle” that is in place since the Oct 2011 low of 74.95, now acting as a “floor” for the market at 97.45.  Since Light Crude Oil is being supported at the moment, a downturn is unlikely for the local Oil & Gas industry.

Light Crude Oil Futures (continuation)

The Oil & Gas industry in Singapore comprises of three main sub sectors: exploration and production, rig & ship building and oilfield services.
Let us take a look at a few interesting stocks within these sub sectors from a 3 to 6 months perspective.

Let us take a look at a few interesting stocks within these sub sectors from a 3 to 6 months perspective.

Oil Rig & Ship Builders

Vard Holdings-Bullish breakout from “Double Bottom”

Relative value chart of Vard Holdings versus FTSE ST Oil & Gas

Vard has broken out of an accumulation phase called “Double Bottom” lasting for 8 months since Jul 2013. The recent upswing in the price action after the breakout has been accompanied by an expansion in volume which indicates a surge in “buying pressure”. In addition, the MACD trend indicator has continued to trend upwards above its centreline. Also, the relative value chart of Vard Holdings versus the FTSE ST Oil & Gas Index continues to show elements of outperformance of Vard Holdings against its benchmark index.

Therefore these observations suggest that the bulls are still in control and as long as the key neckline support of the “Double Bottom” at 0.965 holds, Vard is likely to see a further upside movement to target 1.170 (exit potential of the “Double Bottom”) follow by 1.250 next (upper boundary of the ascending channel & close to the 50% Fibonacci retracement from 14 Sep 2012 high).

However, a break below 0.965 may damage the bullish tone to see a retest on the long-term significant support at 0.780. 

Oilfield Services

Ezion Holdings – Evolving within ascending channel

Relative value chart of Ezion Holdings versus FTSE ST Oil & Gas

Ezion has been trading within a multi-month ascending channel in place since 28 Jun 2013 and supported by the 50-week Moving Average (in blue). In addition, the RSI oscillator has remained above its support level. As long as the key support at 2.05 holds, Ezion is likely to propel higher towards 2.65/2.74 (upper boundary of the ascending channel & multiple Fibonacci projections from different degrees).

On the other hand, a break below 2.05 may damage the bullish trend to see a correction towards the next support at 1.670.

Falcon Energy – Signs of recovery 

Relative value chart of Falcon Energy versus FTSE ST Oil & Gas

After seeing a drastic decline of around 80% from its peak of 0.980 seen in Sep 2009, Falcon Energy has started to see a “wind of change”. Since the 0.205 low on Nov 2012, its price action has been trading in a series of higher highs and lows within an ascending channel configuration. In addition, the recent upside movement in price action has been accompanied by an increase in volume follow by the MACD trend indicator inching up from its centreline.

From a comparison against the FTSE Oil & Gas index, the price action on the relative value chart has pierced above the 20/50-week Moving Averages and supported by positive elements see in the RSI oscillator (above support and broke former trendline resistance). Therefore Falcon Energy continues to show elements of outperformance against its benchmark index.

As long as the key support at 0.340 holds, Falcon Energy is likely to see a further push up towards 0.535 (upper boundary of the ascending channel & 1.00 Fibonacci projection from 12 Nov 2012 low).

On the other hand, a break below the 0.340 support may negate the bullish tone to see a decline towards the next support at 0.205.

For more highlights and weekly outlook on global stock indices and equities, do follow me on twitter

Source:  Charts are from eSignal

Disclaimer

The information contained in this material is intended for general circulation only.  It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs.  Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.  All queries regarding the contents of this material are to be directed to City Index Asia Pte Ltd.

 

kelvin_wong
Kelvin Wong, CFTe

Chief Technical Strategist (Asia), City Index

Kelvin is professional technical analyst with extensive experience in stock indices, equities and foreign exchange. Kelvin employs a combination of fundamental and technical analysis and specialises in utilising Elliot Wave and Fibonacci analysis to pin point potential reversal levels in the financial market. Prior to joining City Index, Kelvin has traded actively and provided investment advisory for institutional traders/investors such as Deutsche Bank, Credit Suisse, ANZ and Goldman Sachs. He has also conducted technical analysis related trading workshops and seminars for thousands of private traders in Singapore and Malaysia.